Question-and-Answer Session
Operator
(Operator Instructions). Your first question comes from the line of Justine Fisher with Goldman Sachs.
Justine Fisher – Goldman Sachs
I’m wondering if you can give us a bit more color around your costs just because one of your competitors reported on Friday, and they reduced Central App production and their costs were up, and they said that they expected costs to stay up for the year, so in the context of this retrenchment of production, can you give us a bit more color around where you expect to your costs to trend?
Ben Hatfield
We’d generally predicated that our costs are going to be flat to improving at this point. Generally speaking, as you would expect, the production units that are being curtailed are the higher cost production units, so as you trim those higher cost units, it’s generally bring down the average. You didn’t see as much of that impact during the second quarter because several of our production adjustments occurred mid to late June, so going forward, we would generally expect somewhat improving trend and cost for the balance year.
Justine Fisher – Goldman Sachs
More broadly, if we talk about when utilities might start needing to get more coal, you said that you think that you could bring back some of your curtailed tonnage, which I guess is the higher cost tonnage, in a reasonable amount of time, if the utilities start needing more coal. I guess that would require prices to be high enough at that point to cover the cost of that production, obviously, right, so you would require a higher market pricing in order to get that done?
Ben Hatfield
Absolutely. In the current environment certainly. There wouldn’t be any interest in bringing any of that production online even if you saw modest improvement in pricing because you need a material shift frankly both to show profitability and an acceptable rate of return, so when we focus on the possibility of bring back some of the production, we would not do so unless we see a pretty meaningful improvement in price, and at this point I would say that’s more likely to be a 2010 event.
Justine Fisher – Goldman Sachs
The last question is just on the contract that you recently renegotiated, are there other contracts that have that kind of terms where the counterparty can break it, and is the guidance going forward pro forma for the renegotiation of that contract?
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